question re. dividend reinvestments

  1. 99 Posts.
    I am curious to know more details about dividend reinvestment plans. When companies distribute dividends in this way, a batch of new shares is issued in lieu of a dividend. Now, what happens to the original monies intended for the divi? Does this money stay in the company or does the company use the money to buy the new shares on behalf of the shareholder? The latter seems a bit of a tedious way of doing things as the money ends up back in the company anyway.
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